Parent company liability and human rights – new claims against mining company filed in the English courts

On 16 April, proceedings were issued in the English courts against Gemfields Limited, a London-based mining company, in relation to allegations of human rights abuses in connection with the activities of its subsidiary in the vicinity of the Montepuez ruby mine in Mozambique.

This case comes hot on the heels of the English Court of Appeal’s two recent rulings on parent company liability and jurisdiction in Lungowe and others v. Vedanta and KCM [2017] EWCA (Civ) 1528 (October 2017) and Okpabi and others v Royal Dutch Shell Plc and another [2018] EWCA Civ 191 (Okpabi) (February 2018). See our earlier blog posts for our more detailed analysis of these two cases: Lungowe v Vedanta and Okpabi v Shell.

We are also awaiting the Court of Appeal’s judgment in the case of AAA and others v Unilever plc and another, which was heard on appeal from the High Court last week. See our commentary on the High court decision here.

The claims against Gemfields

In this latest case, the claimants, over 100 artisanal miners and members of the local communities around the Montepuez mine in Mozambique, allege that Gemfields’ subsidiary, Montepuez Ruby Mining Limitada (MRM), is responsible for a series of human rights abuses they have suffered since the mine’s establishment in June 2011.

The claims include that the claimants have been shot, beaten, unlawfully detained, subject to sexual abuse, humiliated and forced to carry out menial labour on behalf of MRM. The claimants also include four parents bringing claims on behalf of their sons who, they allege, were shot dead by the mine’s security forces. The proceedings are being brought in London against MRM’s parent company, Gemfields, who the claimants argue is responsible for MRM and the local security forces’ actions.

Gemfields strongly denies the allegations, including on the basis that violence occurred both before and after their arrival in the area. They say the violence is often between competing groups of artisanal miners; and where MRM’s security forces have become involved, to protect employees or the local community, their actions have always been appropriate. Gemfields also points to the fact that MRM provides training pursuant to the Voluntary Principles on Security and Human Rights to both employees and service providers; as well as voluntarily offering the training to Mozambican police and government forces.

Parent company liability

The claimants have opted to issue the proceedings in England against MRM’s UK-based parent company Gemfields (which has a 75 per cent shareholding in MRM).

The claimants point to Gemfields’ “mine & market strategy” as evidence of Gemfields’ responsibility for the mine. The policy, adopted by Gemfields in 2010, focuses on ensuring its products are fully traceable from when they are mined to when they are sold at market. They argue that this demonstrates that Gemfields remains actively involved in the running of the Montepuez ruby mine, as well as all other mines, and therefore can be held responsible for operational impacts at the mine.

It remains to be seen what the court will make of the “mine & market strategy”, and whether this is capable of establishing a duty of care, and thus potential liability, for Gemfields in relation to the actions of its subsidiary in Mozambique. The Court’s judgment in Okpabi may be telling – that where a parent company has taken direct responsibility for devising a material policy, the adequacy of which is the subject of the claim, this will be a factor material to the existence of a duty of care. However, all three judges in the Shell case agreed that the mere existence of such policies does not create a duty of care. Simon LJ held that:

“The issuing of mandatory policies plainly cannot mean that a parent has taken control of the operations of a subsidiary (and, necessarily, every subsidiary) such as to give rise to a duty of care in favour of any person or class of persons affected by the policies.”

The Court in Shell distinguished between a parent company which takes steps to ensure that there are proper controls in place by establishing an overall system of mandatory policies, processes and uniform practices on the one hand and a parent company which actually seeks to exercise control on the other. Only in the case of the latter might a duty of care arise. The question of whether Gemfields’ ‘mine and market strategy’ will be deemed sufficient to establish a duty of care will no doubt be a key focus of the decision.

Conclusion

The case will be watched closely by the mining community at a time when the industry is responding to increased pressure to improve transparency in the supply chain and human rights protection around mining activities.

Watch out for future posts reporting on developments in the case.

Julianne Hughes-Jennett is a Partner, Peter Hood is a consultant, Alison Berthet is an associate and Scott Prior is a trainee in Hogan Lovells’ Business and Human Rights Group.

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